The SRA have produced a very thoughtful paper on the LSB’s approach to regulation. It advocates a halt to the proliferation of overlapping responsibilities of regulators and the reservation of all legal services, rather than the patchwork of reserved activities that currently exists. Points about complexity from the public’s perspective, regulatory arbitrage (the risk that regulators will race to the bottom to compete to regulate providers) are well made and important. There is a very interesting critique of the LSB’s presumption in favour of competition and the related but distinct issue of whether it is appropriate to regulate by activity or title. I have a lot of sympathy with the view that the LSB’s approach is, or at least is presented as, overly in favour of competition (you could argue that the LSB’s reaction to the Wills issue is not consistent with that though). I also strongly endorse the idea that there is a distinct public interest in regulation which is separate from the consumer interest in effective regulation. Consider, for example, whether some of the ethical problems emerging through Hackgate are evidence of this.
I have some questions about the SRAs analysis too. Reservation of all legal services creates problems of its own. There is a significant risk of stifling innovation. The paper addresses these in part through cleaving to proportionality and in part through a patchwork of its own of exceptions to who regulates what. One regulator’s proportionality is another’s over- 0r under- regulation. Both the LSB and the SRA would advocate proportionality but the implication of their analysis is that they must mean something different by it or, perhaps more accurately, proportionality is directed by different presumptions (for/against competition/regulation).
They emphasise also the importance of information as a regulatory tool. I’d have liked to see a stronger acknowledgement of the problems of information as a regulatory tool. It is not enough to say “it is better to inform than to curb freedom of contract” when the evidence points quite forcefully to the problems of using information as a regulatory tool. Information needs to be simple and meaningful for it to influence consumer behaviour: it is heartening therefore to see the SRA seeing specialisation as a key signal in a competitive market. The devil is in the detail though: a proportionate approach to specialisation which genuinely stands as a proxy for higher levels of quality is no mean feat. They quote John Vickers (OFT) saying, “But improving consumer information is often easier said than done, especially information that is of immediate and direct practical use…” It will be very interesting to see how they intend to take those words to heart in designing and testing information based regulation.